A U.S. court has rejected Tesla CEO Elon Musk’s monumental $55.8 billion compensation package, reaffirming an earlier ruling that deemed the deal unfair to shareholders. Chancellor Kathaleen McCormick of the Delaware Court of Chancery ruled against Tesla’s attempt to revive the pay plan through a shareholder vote, solidifying her stance from January.
The court found flaws in Tesla’s effort to ratify the package, including misleading details provided to shareholders regarding the potential effects of their vote. “The motion to revise is denied,” McCormick stated in her decision. She further explained that Tesla’s legal arguments, while creative, clashed with established legal principles.
Tesla expressed its intent to appeal, saying in a post on Musk’s social media platform, X, “Shareholders should control company votes, not judges.” Musk echoed this sentiment in his own post, amplifying his dissatisfaction with the verdict.
The court also addressed legal fees related to the case, awarding $345 million to the plaintiff’s attorneys. This amount was significantly lower than the $5.6 billion requested, which McCormick ruled would have been an excessive windfall.
The legal dispute dates back to March 2018 when Tesla shareholders initially approved the pay plan to incentivize Musk for Tesla’s remarkable growth. However, Richard Tornetta, a Tesla shareholder, later filed a lawsuit claiming the board had failed its responsibilities and alleging Musk influenced the process.
Musk, in his defense, argued that Tesla’s investors were highly capable of monitoring his actions. He credited Tesla’s success, particularly the Model 3’s turnaround, as the reason for the company’s growth. He denied involvement in creating the compensation plan or influencing the board’s decisions.
